Post licence small financial banks can join payment system, says RBI

Mumbai: Entities that received in-principle approval for setting up payments banks and small finance banks can join any payment system only after getting the final licence, the Reserve Bank said today.

“… entities that have been granted in-principle approval by it for setting up payments banks and SFBs can apply to the RBI for membership of any centralised/decentralised payment systems, including Bharat Bill Payment System, after receiving the licence for commencement of business under the Banking Regulation Act, 1949,” the central bank said in a release.

RBI had been receiving queries from such entities regarding the approval process for joining any centralised/ decentralised payment systems, it said.

The central bank, in August and September, announced the names of 21 entities that were granted in-principle approval for setting up payments banks and SFBs.

The ‘in-principle’ approval is valid for 18 months during which time the applicants have to comply with all requirements stipulated by the RBI before grant of final licence for commencement of banking business.

In a separate statement, RBI said to encourage innovators in the area of Payment and Settlement System, the central bank has announced ‘Payment System Innovation Awards’.

Broad areas of innovation which could be considered for the awards are payment security including fraud prevention, customer convenience and cost reduction and use of emerging technologies for payments, it said.

The contest would be organised by the Institute for Development and Research in Banking Technology (IDRBT), a wholly owned subsidiary of the Reserve Bank, it said.

“IDRBT would shortly kickstart the process by inviting applications from innovators. Entries will be evaluated by a panel of experts. Three best innovators will be rewarded with citations/prizes,” it said.

The idea of having such award stems from the strong belief of the RBI that right innovation has the potential to change the payment landscape of any country, it said.

“The RBI acknowledges the role of innovations in developing a payment system which is affordable, inter-operable, inclusive and secure,” it said.

PTI